3. Learning Objectives
By the end of this lesson you should be able to:
1. Identify the main reasons why a business will use a
cash flow forecast.
2. Discuss ways that a business can remedy negative
cash flow forecasts.
3. Identify the limitations of using cash flow
forecasting.
4. Re-cap – The importance of cash
flow
Why is cash important?
Able to pay suppliers/ creditors on time.
Avoid insolvency or liquidation!
Able to pay staff wages/ salaries etc.
5. Why do businesses forecast cash
flow?
Why?
Identify areas of negative cash flow.
Used as part of business proposals i.e. – investment/ credit.
Negative Cash Flow?
Plan for additional finance needs e.g. – overdraft, loan, owners capital.
Look at ways to reduce outflow e.g. – cheaper suppliers, less sales on
credit – only cash, redundancies, better timed purchases.
6. Cash flow forecast – are there any
limitations?
Limitations?
Mistakes can be make in preparation – inexperienced
entrepreneur.
Unexpected costs – increase in fuel prices, raw
materials.
Poor judgements/ assumptions – lack of market
research.
It’s a forecast – can it always be accurate?
7. Practice makes perfect!
Complete the cash flow forecast…
Can you identify any key points?
Does the business have any issues of negative cash
flow?
What recommendations would you make?
8. Finally….
How much do you know about Cash Flow
Forecasting?
Try the quiz to test your knowledge.
9. Learning Objectives
You should now be able to:
1. Identify the main reasons why a business will use a
cash flow forecast.
2. Discuss ways that a business can remedy negative
cash flow forecasts.
3. Identify the limitations of using cash flow
forecasting.
